U.S. stocks rise; Russell 2000 rallies

Jobless claims jump to 326,000; Nasdaq Biotechnology index gains 1.9%

NEW YORK (MarketWatch) — U.S. stocks built on advances from the previous session and closed modestly higher on Thursday, with high-growth and small-cap companies leading gains. Investors appeared to shrug off softer economic data, including jobless claims and existing-home sales.

Analysts noted that while markets are inching higher, the disconnect between low bond yields and divergence between small-caps and large-caps is a concern for investors.

Keith Springer, president of Springer Financial Advisors, says that Thursday gains are a continuation of the Fed minutes reaction.

“The stock market should have rallied stronger yesterday when the Fed minutes revealed that Fed is not going to take away the punch bowl any time soon,” Springer said.

“But the larger issue is that the bond market — where the 10-year yield is at 2.5%, is most likely correct to think the economy is weakening. Therefore we expect a 10%-15% correction in the stock market this summer,” he added.

“If the economy continues to grow very tepidly by the end of the year, when the Fed has exhausted its bond-buying stimulus program, what other tools will they have to ramp up growth? That question is worrying investors more than when the rate hikes will come,” Russell said.

In economic news, new applications for unemployment benefits rose sharply in mid-May, reversing a big drop earlier in the month that put initial claims at a seven-year low.

In earnings news, Hewlett-Packard Co.
HPQ, -0.33%
reported a fiscal second-quarter profit that was mostly in line with expectations. H-P also announced that it is eliminating an additional 11,000 to 16,000 jobs. Shares were down 4% after hours.

European stocksSXXP, +0.03%
got a boost from preliminary euro-zone PMI data that confirmed business activity in the region continued to pick up in May. In Asia, the Nikkei 225 index
NIK, +0.30%
was the best-performing market, up 2.1% after Markit released its first-ever preliminary version of Japan’s manufacturing index, which rose to a two-month high of 49.9 in May.

Gold for June delivery
US:GCM4
settled higher, recouping losses from a day earlier and then some. Crude for July delivery
US:CLN4
closed below $104 a barrel, pulling back from a one-month high as traders assessed the prospects for energy demand.

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